WTI hits fresh multi-year highs before retreating on Profit Taking

WTI hit fresh multi-year highs above $88.00 per barrel recently, breaking above last week’s highs. Profit-taking has since seen WTI drop back into the mid-$86.00s, but oil holds onto decent on the week gains.

Positive risk appetite and ongoing geopolitical and OPEC+ supply concerns are an ongoing source of support that might limit downside.

Crude oil prices have been on the back foot in recent trade amid profit-taking after they plowed to fresh multi-year highs. Front-month WTI futures surpassed the $88.00 level for the first time since October 2014 in the last few hours, finally managing to surpass last week’s highs just under $88.00 after failing on Wednesday in wake of the hawkish Fed meeting.

However, profit-taking in the last few minutes has seen WTI give up its earlier session gains and slip back into the mid-$86.00s, where it trades down by slightly more than 50 cents on the day. At current levels near-$86.50, oil is trading well within recent intra-day ranges and still holds onto gains of about $1.75 on the week and is more than $4.50 up from earlier weekly lows.

Risk appetite has broadly taken a turn for the better on Thursday, with the S&P 500 up about 1.5% on the session, which (prior to the profit-taking) had been offering some support to crude oil prices.

Meanwhile, according to market commentators and analysts, ongoing OPEC+ supply concerns and the tense geopolitical backdrop continue to offer support to the oil complex.

After the US and NATO issued a formal response to Russian security requests (essentially rejecting demands to rule out Ukraine ever joining NATO and reduce their Eastern European military presence), global markets await Russia’s next move.

According to Reuters, tensions between NATO/Russia/Ukraine have been “fanning fears of disruption of energy supplies to Europe”. “A more pronounced price slide is being prevented by the Ukraine crisis, as there are still concerns that Russian oil and gas deliveries could be hampered in the event of a military escalation,” analysts at Commerzbank said.

Meanwhile, oil market analysts remain concerned about the struggles faced by smaller OPEC+ producers in lifting oil output. Sources have indicated the cartel plans to hike output again in March by 400K barrels per day. OPEC+ supply and geopolitical concerns shielded oil prices this week from bearish US inventory data, which showed a surprise 2.4M barrel inventory build last week.